AP
Bank of America shares slide on Merrill deal
Monday September 15, 7:17 pm ET
Bank of America shares fall after bank agrees to buy brokerage Merrill Lynch for $50 billion


NEW YORK (AP) -- Bank of America Corp. shares fell Monday after the bank agreed to buy Merrill Lynch & Co. in an all-stock deal originally valued at $50 billion.

Shares tumbled $7.19, or 21.3 percent, to $26.55. The stock has traded between $18.44 and $52.96 in the past 12 months.

Under terms of the transaction, Bank of America would exchange 0.8595 shares of its common stock for each Merrill Lynch common share.

Based on BofA's closing stock price Monday, the deal was now valued at less than $40 billion, or $22.82 a share.

Charlotte, N.C.-based Bank of America has the most deposits of any U.S. bank, while Merrill Lynch is the world's largest investment bank.

If the deal is completed, Bank of America will be able to offer Merrill Lynch's retail brokerage services to its huge customer base.

In a note to clients, Deutsche Bank analyst Mike Mayo said he sees long-term strategic advantages for Bank of America, but noted several integration risks.

"Execution risk seems high given Bank of America's decade-long struggle to improve the investment bank," Mayo said. Furthermore, Bank of America will still need to resolve Merrill Lynch's risky assets, including its significant mortgage and commercial real estate portfolios.

Mayo also said the bank could lose revenue as clients look to diversify the location of their financial holdings. There is also the risk of culture clashes between the two firms, Mayo said.